Investing in dividend stocks that have experienced a downturn might seem counterintuitive. Yet, such opportunities can offer substantial benefits for investors. When a dividend-paying stock’s price declines, its dividend yield increases, providing a higher return on investment for shareholders.
This scenario allows investors to acquire shares at a lower cost, positioning themselves for potential capital appreciation when the stock rebounds. Plus, companies committed to maintaining or growing those dividends demonstrate financial stability and shareholder focus, making them attractive long-term investments. So, how can you get started? Let’s get into it.
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Parkland
Parkland (TSX:PKI), a leading fuel distributor and convenience store operator, has seen its stock price decrease by approximately 19% over the past year. Despite this decline, the dividend stock remains a compelling investment option due to its consistent dividend payments and strategic initiatives aimed at enhancing shareholder value. The dividend stock’s forward annual dividend rate stands at $1.40, yielding about 3.89% at writing. It is quite appealing in the current lower-interest-rate environment.
In the third quarter of 2024, Parkland reported sales and operating revenue of $7.13 billion, with an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $431 million. While these figures represent a decrease from the same period in 2023, the dividend stock attributes this to lower global refining margins — a factor impacting the entire industry. Notably, Parkland’s Canada segment delivered an adjusted EBITDA of $200 million, reflecting the resilience of its core operations.
Parkland has also been proactive in optimizing its portfolio to focus on high-return assets. The dividend stock announced plans to divest its Florida-based retail and commercial businesses, aligning with its commitment to disciplined capital allocation and redirecting resources toward more profitable ventures. This strategy is expected to enhance Parkland’s financial flexibility and support its growth objectives.
Future outlook
Looking ahead, Parkland has provided a 2025 adjusted EBITDA guidance of $1.95 billion, plus or minus $150 million, reaffirming its confidence in achieving its 2028 growth ambitions. The dividend stock anticipates that, despite lower than mid-cycle refining margins, adjusted EBITDA from its retail and commercial businesses will increase by approximately 5% in 2025 — consistent with its growth commitments.
Parkland’s commitment to sustainability and innovation further enhances its investment appeal. The company has invested in renewable fuels and expanded its electric vehicle charging infrastructure, positioning itself to meet evolving consumer preferences and regulatory requirements. These initiatives not only contribute to environmental goals but also open new revenue streams, supporting long-term profitability.
Moreover, Parkland’s diversified operations across 26 countries in the Americas provide a robust platform for growth. This geographic diversity mitigates risks associated with regional market fluctuations and enables the company to capitalize on opportunities in various markets. Serving over one million customers daily, Parkland’s extensive retail network underscores its strong market presence and customer loyalty.
Bottom line
In summary, while Parkland’s stock has faced a downturn, its solid dividend yield, strategic asset optimization, positive earnings outlook, and commitment to sustainability make it a compelling investment choice. The dividend stock’s proactive measures to enhance shareholder value and adapt to industry trends position it well for future growth, offering investors the potential for both income and capital appreciation.
